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Oscar Barrientos: The Mighty Defender

Retired Regional Trial Court Judge Oscar P Barrientos has found himself on the other side of the fence as defender of the cigarette manufacturer Mighty Corporation.

As the executive vice president of Mighty Corp., Barrientos also doubles as company spokesman. He has become the face for the low-profile owners of the wholly-owned Filipino cigarette company, who have been doing their business for 68 years quietly and away from the prying eyes of the media and even from competitors.

But the former judge, who also leaches marketing and finance, sees his role in Mighty more of a battle in actual grassroot marketing rather than a courtroom drama.

MIGHTY
Chinese migrant Emmanuel Wong Chu King founded La CampanaFabrica de Tobacos Inc. in 1945 as his way of helping Filipino war victims.

At first, Wong Chu King, married to Nelia, a Filipina, did everything from blending the tobacco to working as salesman, delivery man, collector, cashier and promoter of his products. The Company specialized in producing native cigarettes. The iconic Bataan Matamis and Kaibigan were the company’s original brands.

In 1985, Mighty Corporation was established and became the American blended Virginia Cigarette Manufacturing Co. In 2001, Mighty entered into a cigarette manufacturing agreement with Sterling Tobacco to produce the latter’s trademarks. In 2004, the company entered into a cigarette manufacturing agreement with the Philip Morris Philippines as the latter brought the trademarks of Sterling Tobacco.

Mighty Corporation envisioned to become the number one tobacco company in the Philippines supported by its dynamic and professional associates who are committed to produce value for money products and excellent service for total customer satisfaction.

The company seeks to delight its customers with best value products and services in all point of distribution at any given time.

The rest is history. What used to be just a simple native cigarette manufacturer has expanded to become not just an industry pioneer but a force to reckon with under one name Mighty Corporation.

BEST PROPOSITION
Barrientos, who joined Mighty Corporation a year ago upon the encouragement of the owners who happened to be good friends of his, can only at least in the best position that this company has to offer and will continue to offer.

While Mighty focuses on the non-premium cigarette brand, it does not lose focus on what makes it tick all these years. It has remained faithful to what it does best, producing cigarettes for the Filipinos market content with a 3 percent market share.

“Mighty has good taste, good price and good packaging,” stresses Barrientos.

Mighty made its presence felt in the market in 2013 only when the revised excise tax law on sin products (cigarettes and alcohol) was implemented.

While both prices for premium and the non-premium brands were adjusted to account for the increase in excise tax, the non-premium has a lower tax increase and therefore it has lower price hike while the premium brands have to endure with the huge price hike making them more expensive to the ordinary smoker.

As prices of cigarettes become more expensive, most smokers can no longer afford the premium cigarette brands so they shift to the non-premium brands benefitting Mighty, which has a total of 23 brands.

STRATEGY
But Mighty has another big edge: Its clear understanding of the domestic market, which it has been serving well and faithfully for the past 68 years.

The company has devised an effective marketing strategy. Mighty concentrated its marketing in the provinces, which accounts for as much as 70 percent of its sales while Metro Manila has only 30 percent.

“We have a very good distribution system focusing in the rural areas. Our distribution system touches system right down to the grassroots,” says Barrientos.

In fact, Mighty is very strong in the Zamboanga area. Its premium competitors though have been concentrating in the big cities and their distribution are mostly in big supermarkets.

Mighty has also a strong sales force. It has increased the number of salesmen in Metro Manila alone to over 90 now from only 7 to 8.

“We understand the market better,” says Barrientos, who finishes his MBA at the Asian Institute of Management.

Another unique strategy is the company’s credit line offer to the rural sari-sari stores. This strategy does not only ensure that small stores carry Mighty products, but also augment the poor Filipinos capital to enable them to continue their small business.

This has endeared them to the sari-sari store owners, who now prefer Mighty grateful for the lifeline provided to them.

According to Barrientos, 70 percent of Filipino smokers buy by the stick, not packs.

The company has also tapped the direct selling network to further beef up its market.

LOW COST
Barrientos explained that at the end of the day, the price of a merchandise will redound to the cost of production plus margin.

In the case of Mighty, it has never gone overboard in its expenses. Its operation has remained low cost with not much overhead cost.

“In the first place, we don’t have expats personnel to pay for. An expat can easily command $10,000 salary a month,” says Barrientos. Maintaining expats is expensive because the employer must also consider they have a lifestyle to keep.

All these years, Mighty has remained a low maintenance firm. It holds its headquarters in an almost four-hectare lot in Makati, along the Pasig River which also serves as the residence of the company owners. Most traditional Chinese businessmen also reside in a building where they do their business. This lean organization is simple and bereft of the trappings of the high-end offices in Makati. It operates in an old but well-maintained building. It has a ten-hectare cigarette manufacturing plants in Malolos, Bulacan.

“Our strategy at the plant is to produce low cost but quality cigarettes, but we go for volume because there is a strong demand for our products,” says Barrientos.

MARKET SURGE
Mighty also used to export cigarettes before but with the strong demand in the local market, it would rather concentrate in the domestic market.

If the cigarette market was estimated at P100 billion in 2013, then Mighty accounts for P20 billion of that given its 20 percent market share. With that, the company paid P8.2 billion in excise tax in 2013.

“all our excise taxes have been paid in 2013,” says Barrientos.

Barrientos says the tobacco industry is second only to the banking in terms of tax contribution to the government. There are five major players in the local cigarette industry, including Mighty.

But Barrientos says that the implementation of reformed excise tax will continue to push the market towards the non-premium cigarettes.

“For this year, we are expecting a further widening of our market share to 30-40 percent over last year’s 20 percent,” says Barrientos.

“We did not expect this market surge,” says Barrientos, whose company is now reaping the impact of the win-win government taxation policy.

“We expect a favorable business in our favor because of our marketing strategy in Metro Manila and in the provinces and the continuing impact

CSR
The company has allocated 10 million for its corporate social responsibility program under its Wong Chu King Foundation Inc., which was registered with the Securities and Exchange Commission on March 10, 1990 by the heirs of the late philanthropist patriarch Wong Chu King.

Its CSR program is mostly providing education to poor but deserving students. Now, it’s scholars are mostly children of tobacco farmers numbering 100 and is expected to reach 500 this year.

This scholarship program, which is geared for the tobacco farmers or through the Federation of Tobacco Farmers, has been going on for the past ten years already.

Part of its CSR program is to help improve the quality of local tobacco produce so they will not import anymore in the long run.

“Why is the imported tobacco has better quality than the locally grown when they come from the same seeds,” says Barrientos.

The company also extends assistance to affected families during calamities without any fanfare.

Barrientos relates that his father was a chain smoker who could consume three packs a day, but he does not smoke nor his seven other siblings.

“But I don’t feel guilty being in this industry,” says Barrientos of his work in the cigarette industry, which is known to cause lung cancer.

“The health warning that cigarette is addicting is right although it has no effect to some,” notes Barrientos.

His being in the industry does not give him also the license to encourage others to smoke.

“I will not encourage anyone to smoke, but let them find their own stick. Parents are only there to guide, although children may not follow them 100 percent,” says Barrientos, who used to play golf until he joined Mighty.

“I was supposed to be enjoying my retirement, but I was called to this job, something that I cannot refuse because it is very challenging. Aside from that, one of the owners is a good friend of mine and they treated me well and that’s what they’ve been doing with the rest of the employees,” says Barrientos, who finished law and management from the Pamantasan ng Lungsod ng Maynila and the Philippine Christian University.

“This is a family-owned corporation, but the owners are very fair and professional. I enjoy this job, otherwise I should have left already. It’s good to meet new people and become part of this company,” says Barrientos.

“I am happy here. Definitely, I am in the right company,” says Barrientos.